TaxTMI 
TaxTMI 
2013 (9) TMI 231
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....section 92C(3) of the Act are satisfied in the present case; 2.2 disregarding the Arm's Length price ("ALP") as determined by the Appellant in the Transfer Pricing (TP) documentation maintained by it in terms of section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 ('Rules'); 2.3 including certain companies that are not comparable and are diversified as compared to the Appellant (Stup Consultants. Kirloskar Consultants Mahindra Consulting and Semac Limited) in terms of functions performed, assets employed and risks assumed: 2.3.1 Strictly without prejudice, if the afore-mentioned comparables were to be accepted, then the comparables taken by the Appellant (namely Kitco Ltd. Consulting Engineering Services and Development Consultants) should also be taken into consideration in determination of the arm's length price of the international transactions; 2.4 excluding certain companies on arbitrary/ frivolous grounds even though they are comparable to the Appellant in terms of functions performed, assets employed and risks assumed (Consulting Engineering Services and Development Consultants); 2.5 inclusion of certain companies (namely Mahindra....
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....e assessee's case. 3.5 That on the facts and circumstances of the case, and in law the Ld. AO and the DRP erred in placing reliance on Instruction No. 3/2010 dated March 23, 2010 issued by CBDT. as the same is ultra vires to the scope of section 119 of the Act. being prejudicial to the interest of the assessee." 3. Brief facts are: Bechtel India Private Limited ('BIPL' or 'the Company' or 'the appellant') is engaged in the business of export of customized electronic data in the form of designs, drawings, calculations and other relevant datasheets relating to project engineering and commercial solutions for power plants, refineries, petrochemical plants etc. and is thus characterized as an 'engineering design service provider'. 3.1 The Company is a captive service provider, providing engineering design services to its Associated Enterprises (AEs) to support the overseas office's turnkey project execution. 3.2 During the relevant financial year, the Company undertook the following international transactions with its AEs : S. No. Nature of international transactions Value (in INR) Method applied 1 Provision of engineering design and r....
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.....15% Average 9.39% BIPL's margin 16.42% 3.7 The above results provided evidence based on current year data (i.e. FY 2007-08 data) that the international transactions pertaining to provision of engineering design services were at arm's length and in accordance with the Indian Transfer Pricing ('TP') Regulations. 3.8 Based on the above economic analysis, the Ld TPO accepted one comparable company, viz., UB Engineering from the above search and rejected the other 6 companies on various grounds such as functional dissimilarities, significant related party transactions, non-availability of Annual reports etc. 3.9 The Ld TPO finally arrived at a set of 6 comparable companies in the TP Order as given below. S.No. TPO's Comparables Working capital adjusted OP/TC margin 1. Mahindra Consulting Engineers Ltd. 31.37% 2. Alphageo (India) Limited 41.27% 3. Stup Consultants Limited 33.33% 4. Semac Limited 51.71% 5. Kirloskar Consultants Ltd. 30.47% 6. UB Engineering Ltd. 5.00% Mean 32.19% 3.10 The working capital adjusted average mark-up on cost of 32.19% was higher than the mark up on cost of 16.75% of ....
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.... Act and accordingly, the appellant's international transactions could be held to be satisfying the arm's length standard under the Indian Transfer Pricing Regulations. 4.3 With respect to Semac Ltd., if Semac is to be accepted as a final comparable, even where annual report is not legible for the FY 2007-08, and it is difficult to determine amounts of each line item of costs such as employee costs etc., then on same parity Consulting Engineers and Development Consultants comparables should be included in the final set of comparable companies. 4.4 The TPO rejected the comparables on the basis that it is deriving majority of its income from "engineering Assignment" and no segmental information is available in the annual report about the consultancy services Segment. Hence, it is not functionally comparable to the appellant. It is to be noted that the appellant is an engineering design service provider. Therefore, there is no reason for excluding Kitco in the final set of comparables. 4.5 Thus if the Ld TPO is accepting , viz, Mahindra Consulting, Semac, Stup Consultants and Kirloskar Consultants which have significantly diversified operations as compared to the appellant,....
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....ction in the year of incurrence computed under mercantile system by following the accounting standards in this respect or at the time of realization of export proceeds on maturity of forward contracts. 5.3 It is pleaded that similar question arose in the case of CIT v. Woodward Governor India (P.) Ltd. [2009] 312 ITR 254 that whether the loss arising on fluctuation of exchange in respect of loan taken for revenue purposed is allowable as deduction in the year of fluctuation of exchange rate or whether the same could be allowed only in the year of repayment of such loan. The Supreme Court held that the loss suffered by the assessee on account of exchange difference on the balance sheet date is an item of expenditure as on balance sheet date. It further held that profits or losses as per mercantile system of accounting and as per the applicable accounting standard is allowable as deduction unless the system of accounting is superseded or modified by the legislative enactment. It further held that when the method of accounting continuously undertaken by the assessee is supreme as there is no finding given by the AO on the correctness and completeness of accounts or any finding to the....
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....rival contentions and perused the material available on record. Apropos T.P. addition, the DRP has directed the TPO to include the comparable case of M.N. Dastur & Co. (P.) Ltd. The grievance of the assessee now pertains to the adoption of Semac as comparable by DRP only on the basis of annual report of the subsequent year and that of current year which is not legible and on which assessee could not submit its valid comments. If Semac is removed from comparables due to these infirmities in that case the comparable OP/TC margin works out to 19.75% as against 16.42% declared by the assessee, which falls straight way in the safe Harbour Rules i.e. proviso to sec. 82C(2). 7.1 Similarly, the assessee contends that the comparables viz. Mahindra Consulting Engineers Ltd., Semac Ltd., Stup Consultants Ltd. and Kirloskar Consultants Ltd., which are in significantly diversified operations as compared to assessee, in that case Kitco offered by assessee should not have been removed on this reasoning. Thus the assessee claims to include Kitco on the same parameters and if that is done in that case also the OP/TC comes within the parameters of Safe Harbour Rule i.e. (+)(-) 5% and in that case t....